Administration to Unveil Student Loan Relief Efforts

The Clinton administration today will announce efforts to make college loans more affordable for students and to offer debt relief to teachers who agree to work in poor and inner-city schools.

The changes are expected to save students and their parents $600 million over five years and reduce teachers’ debt by $122 million over three years, White House officials said. Clinton will make his announcement at DePaul University in Chicago, where he will participate in a round-table discussion with college students.

“The student loan program isn’t significant enough to push a lot of new people into higher education, but it’s enough that it will help those who would have already gone to reduce their costs,” said Michael Griffith, a policy analyst with the Education Commission of the States.

Students who repay their loans on time will receive an interest rebate equal to 1.5% of their loans, saving the average undergraduate $150 on every $10,000 borrowed. Those who transfer their loans to the federal government’s $11 billion direct student loan program will enjoy a drop in their interest rate of 0.8 percentage points.

Teachers who work for five consecutive years in needy schools will be eligible for as much as $5,000 in school loan forgiveness, as long as one of those years is 1998-99 or later. The rule, to be issued by the Department of Education, implements legislation passed in 1998.

Griffith said the teacher loan forgiveness program is a “nice idea,” but the $1,000-a-year subsidy may not be enough to attract teachers into the neediest schools.

The other initiative is designed to encourage students to repay their loans promptly. To qualify for aid, students must make their first 12 payments on time.

More than 1.7 million students a year are expected to receive the rebate beginning with the 2000-01 academic year, and more than 400,000 students are expected to see their interest rates fall, officials said.